Science is facts; just
as houses are made of
stones, so is science
made of facts; but a pile
of stones is not a house
and a collection of facts
is not necessarily
science.

– Henri Poincare

Battered by Your Bank?

by Stephen Morris

You aren't bound to your big, international bank. A lot of us are really and truly sick of getting socked with fees, tripped by hidden penalties, and earning lousy interest rates. We're tired of being treated like a nuisances.

Relief, thankfully, may be just down the street at your nearest credit union or its close relative, the locally-owned bank.

Tina S. de la Torre is Director of Marketing and Community Relations for the Northfield Savings Bank, a financial institution founded in 1867 that donates 10% of profits to community organizations. (“We call this 110% Banking. You can call it peace of mind,” is their slogan.)

“39% of Northfield Savings Bank employees have worked here more than ten years. Our employees are your neighbors and friends, and who love to greet you with a smile when you stop by a branch to say hello.” With 13 locations now, this is increasingly easy to do.

With more than for 144 years under its belt and still headquartered in the town of its origination, Northfield Savings Bank has been helping Vermonters with loans and banking needs for more than seven generations. “I suppose folks could say we’re ‘real’ Vermonters,” adds de la Torre. That’s an understatement. In 2010 Northfield donated $420,000 to Vermont non-profits. “Simply by banking with us,” she says, “our customers are helping pay it forward with this community dividend.”

Just down the road from Northfield is the Randolph National Bank. They are the new kid on the block, having served their local community for only the past 131 years. Bill Blaiklock, Branch Manager of RNB’s Quechee office offers a few more compelling reasons to go local with your money. “Stability. We know the people and business of the community. This makes for strong, long term relationships.” Steve Dimick, president of the bank, is the son of the former RNB president. Nepotism? Hardly. Dimick received the Outstanding Community Service Award for the role the bank played in revitalizing Randolph’s downtown after a series of devastating fires.

“Local decisions mean speed and flexibility,” says Blaiklock. “We don’t have the red tape of big institutions.” In banking, however, speed is not desirable in every area. “We don’t make sudden or quick changes. Our policies are consistent and conservative.”

By comparison, the Bank of America which is (measured by assets) the largest bank in the country was only founded in 1998! “With us,” says Blaiklock, “your loan officer will likely be the same one you’ve always had. People make their careers here. Customers can speak to senior management if they need to or want to. We want your business, and we want you to succeed.”

(In case you are wondering, the “national” in the Randolph National Bank name refers to its charter, not the market it serves.)

“We Know Your Dog”

On the West Coast Cheryl Cebula, President and Chief Operating Officer of Albina Community Bank in Portland, Oregon shares some thoughts on why local banking can be the best option:

“1 - Does your bank live here or work here? At local financial institutions, decisions are made locally, rather than across the country. Because of better access to the decision-making process, decisions are made quicker and take our local neighborhoods into account.

2 - Deposits work harder in a neighborhood than a vault. At local financial institution, deposits are reinvested back into our local neighborhoods to help build small businesses and create jobs.

3 - At local financial institutions, we not only know you by name, we also know your dog. We take the time to get to know each customer - including their individual financial goals, their favorite local causes, and even their pets.”

Local banks are not the only financial institutions that support local non-profits with charitable donations. John Benoit, President & CEO of NorthCountry Credit Union in South Burlington, Vermont points out that his organization distributed more than a quarter million dollars to local organizations. Says Benoit “When you keep your business local, your money stays local. Deposits are turned into loans to other account holders to use for important purchases like homes, vehicles, and college tuition. Money also makes its way back into the community in the form of salaries for our employees, all of whom live in the region. Everybody wins.”

Benoit says the shorter chain of command makes for much more efficient decision making. “No calls to strangers in Ohio, Arkansas, or Florida,” he puts it. This means decisions on loans are made more quickly. And since the person making that decision is likely to be the same person you wave to in the grocery store, you know they will be doing their best to keep you happy.

Just the Facts

Like bank deposits, money in credit unions is insured for at least $250,000 per account. Instead of the Federal Deposit Insurance Corp., which insures bank deposits, the coverage is provided by the National Credit Union Administration, but both agencies are backed by the full faith and credit of the federal government.

And you aren't restricted to using your own credit union's ATMs. Most CUs either offer fee-free access to a huge network of ATMs or reimburse your fees if you use other institutions' machines.

The difference between banks and credit unions can be summarized fairly simply:

* Credit unions are member-owned. If you have an account at a credit union, you're a part owner in the enterprise. There is always an affiliation between the members. Often this goes beyond geography. Bob Furman of the River Valley Credit Union points out that one of the first credit union was at Filene’s, the legendary Boston Department Store. “Edward Filene is the recognized founder of the Credit Union Movement. Filene pioneered things like Workers Compensation and equal pay for women. The Credit Union was created to give working people a financial institution that they would co-operatively own so that they could determine it's course and policies. Part of this concept is the charge of providing financial literacy to the credit union members.” (Echoes of contemporary phrases like “social responsibility” and “triple bottom line.”)

* Credit unions are not-for-profit. This explains why interest rates can be significantly better, and fees fewer and smaller than at nationally-owned banks that are driven by bottom-line profits. Any profits credit unions do make are distributed as dividends to their members. Contrast that with banks, which continually invent new fees and policies to boost profits to pay those outrageous executive salaries.

*Credit unions are governed by different financial regulations than banks, giving them, in the eyes of traditional banks, an unfair advantage. President Franklin D. Roosevelt signed the Federal Credit Union Act into law in 1934 to "promote thrift and thwart usury." Says Furman “Credit Unions look at more than credit scores when lending money. A credit union member's character and history of repayment is also considered, regardless of numerical credit scoring.”

Part of the mission os a credit union, says Furman is “to work with their members to educate them on what they need to do to acquire mortgages, automobile loans, and credit cards, and how to manage their finances.” Don’t expect that kind of help from Citibank.

Some of the “unfair advantage” of credit unions comes from the fact that they are exempted from most state and federal taxes. For-profit banks (who do not receive this benefit) spend time, energy, and money lobbying to legislate credit unions out of existence, or at least limit who can join. (The banks counter by saying they are just trying to keep the credit unions true to their charters.) Despite these efforts the Credit Union National Association, the CUs' trade group, brags that virtually everyone in the U.S. can belong to a credit union.

Jerry Cross, CEO of One Credit Union with offices in Vermont and New Hampshire underscores the importance of the educational mission. “A local credit union works in your best interests, offering free services and products that help you achieve your financial goals. They also help educate you on many aspects of your financial path; from balancing your checkbook, to improving your credit score. Plus, earnings are returned to the members in the form of lower loan rates and higher savings rates.”

In contrast, have you ever tried to decipher the little booklet of fine print that comes with your credit card? The intent, both literal and figurative, is to make the rules and services (and fees and penalties) obscure. Have a question? Take your pick: a machine or a service representative moonlighting on the other side of the globe.
The ATM Ate My Card!

Yvonne Garand, CLU, ChFC and Vice President, Marketing & Business Development at the Vermont State Employees Credit Union (VSECU) offers a chillingly graphic example of the advantages of doing business locally. “What if, say on a Sunday morning, you attempted to withdraw money from your savings account at the drive-thru ATM, and for some reason the ATM machine swallowed up your ATM card. And you’re left sitting in an idling car. What would you do? It’s nice to know you can find a telephone number of the person you normally see at VSECU and call them at home with your concern. And better yet, get your card back Monday morning without going through out-of-state corporate headquarters to prove your identity by submitting a copy of your driver’s license, birth certificate, or passport.”

We’ve all had experiences with financial institutions, airlines, or even the federal government where our frustration at the poor service has caused our anxiety to skyrocket. This is unlikely at a local bank or credit union, says Garand, for the simple reason that “People who work at a local financial institution have a vested interest in doing their absolute best job to serve members of the community. Local employees and consumers likely share similar friends, schools, interests or civic events. Employees will strive to give the BEST customer service and not risk being embarrassed by hearing neighbors speak poorly of them in these shared venues.”

Credit unions count 90 million members nationwide, yet remain in the best-kept secret category. Their members save an estimated $8 billion a year in better interest rates and reduced fees. Their credit cards often do not have annual fees or to charge punitive interest rates for a single late payment. Many offer free checking accounts, and penalties that are 50% less than those charged by megabanks.

What they don’t offer, however, are elaborate schemes for accumulating “points” that can be accumulated towards luxury goods or airlines tickets that are impossible to schedule. Local banks, similarly, avoid slickly merchandised promotional programs in favor of fair rates and rock-solid service.

For recommendation on a good local bank, see who sponsors the Little League teams, is active in the Rotary, or best of all, ask a neighbor. For a slick tool to help you find a nearby credit union, go online at JoinACU.org.

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